ARTIFICIALLY INTELLIGENT ROBOT LAWYERS
Computer algorithms, machine learning and artificially intelligent robots have made their way into all facets of our society. But now the major investment banks of the world such as Morgan Stanley, JP Morgan, Goldman Sachs and Credit Suisse have begun implementing this technology into more and more rigorous business processes, in a bid to save millions.
But now it appears even lawyers are beginning to lose out to structural unemployment (loss of jobs due to technological innovation).
2021 saw Morgan Stanley save over $10 million USD in lawyering fees by adopting an artificially intelligent algorithm to scour through millions of LIBOR (London Inter-Bank Offered Rate) loan contract clauses. As reported by Bloomberg, this cost lawyers 50,000 human billable hours.
Lewis Liu, CEO of Eigen Technologies Ltd, an AI data analytics company hired by Goldman Sachs to conduct similar work to Morgan Stanley told Bloomberg that “We had a client that had 15 million queries and they were able to get all that answered within a quarter… The alternative would have been literally an army of lawyers and paralegals over a year, or maybe two.”
LIBOR was the most widely used short-term interest rate reference in the world, “reflecting the average rate at which major banks can obtain unsecured funding in the London interbank market, in a specified currency and for a particular period. It is still being produced for five currencies (US Dollars, Sterling, Euros, Japanese Yen and Swiss Francs).”, as reported by Clyde & Co.
During 2021 major regulatory changes were made to the banking sector across the globe in a bid to phase out LIBOR lending practices due to supposed 2008/09 manipulation.
This placed a monumental strain on investment banks to review and change all of their contractual loan agreements before the December 2021 deadline.
According to Clyde & Co “The transition from LIBOR to alternative rates over the next year represents one of the biggest changes to the financial services industry ever. With an estimated $370 trillion of LIBOR related activity globally, covering loans, bonds, derivatives, working capital and trade products, the LIBOR transition will significantly affect how contracts are priced.”
Though algorithms were responsible for the heavy lifting, human intervention is still required to interpret the data and to structure a methodical strategy on how best to switch the contracts from LIBOR to the now preferred “dollar-based legacy products” through tedious negotiations.
Now that these LIBOR robots have proven themselves as affective, JP Morgan and other banks have begun tasking similar AI algorithms to conducting different administrative tasks.
This is predicted to have major impacts on profitability down the line, with other monotonous human jobs planned to become automated.
Forbes predicted that in 2020 “Over 1 million knowledge-work jobs will be replaced by software robotics, RPA, virtual agents and chatbots, and machine-learning-based decision management.”
This trend is predicted to continue growing exponentially into 2022 and the near future.